Pacific Community Ventures creates loan fund for 'tweener' companies

Pacific Community Ventures is helping out businesses stuck in the middle.

As part of a new fund, the San Francisco-based nonprofit will provide loans between $50,000 to $150,000 to fast-growing Bay Area businesses that create jobs for people in low-income communities.

The business advising integrated loan fund, or SAIL, aims to bridge the gap between microloans and big bank lending.

“This middle market is more challenging because the businesses needing them are bigger, so loans are bigger, which is a big risk for banks,” said Allison Kelly, Pacific Community Ventures’ statewide director of business advising. “For banks, it takes the same amount of effort and money to underwrite a $200,000 loan as it does $30 million loan — it’s just not worth their while.”

Pacific Community Ventures recently received a $1 million federal loan to help create the program and was awarded another nearly $1 million from the U.S. Department of Treasury’s community development financial institutions fund.

The loan terms range from one to five years and have an annual fixed interest rate of 7 percent. The loans should be used as working capital, for inventory purchase, new construction or acquisition of existing business.

Companies eligible to receive a loan must be at least two years old and have annual revenue of between $250,000 to $5 million.

“It’s our goal to graduate the smaller borrowers from getting small debt to be able to take a loan from a commercial bank,” Kelly said.

As part of the program, borrowers will also work with the organization’s loan advising program, which is comprised of a network for more than 200 business professionals who volunteer their time.

“By adding our advising component, it will help educate small business owners on how to deploy capital effectively," Kelly said. “Also, if they are facing a challenge, they’re not facing it alone.”

Four candidates are already being considering for the program. Kelly hopes to have six recipients by the end of the year and grow the fund to $5 million in the next three years.